Business

All 4 Lexington Graeter's stores are closing

Graeter's on Romany Road is among four in Lexington closing Friday. The same franchisee is closing four others in Northern Kentucky.
Graeter's on Romany Road is among four in Lexington closing Friday. The same franchisee is closing four others in Northern Kentucky.

The Lexington and Northern Kentucky franchisee of Graeter's ice cream stores announced Monday that all eight of the stores will close Friday. The closings come after a deal to sell the stores fell apart.

"We've sought buyers, we've sought financing, and at this point, we don't have the cash to continue moving forward," said Zaki Barakat, president of franchisee International Brand Services.

Cincinnati-based Graeter's had offered to buy the stores but backed out last week and terminated the franchise, he said, with Graeter's CEO Richard Graeter noting the company was concerned about some underperforming stores. Graeter said the company hopes to open locations in Lexington again by spring, perhaps even reopening a couple of the existing stores.

International Brand Services operated eight stores, four each in Lexington and Northern Kentucky, and had about 70 part-time and full-time employees. It manufactured ice cream for the stores and supplied Graeter's ice cream to grocery stores throughout Kentucky except in Louisville, which is served by a different franchisee. Grocery service won't stop, though, as Graeter's corporate will begin supplying the ice cream for sale.

"Hopefully, you won't miss a beat," Richard Graeter said.

The franchisee had been suffering from a "cash crunch" for a while, Barakat said.

He said that while each of the stores was "virtually profitable or breaking even," the business was extremely seasonal.

"In the winter, cash is a big problem," Barakat said, emphasizing interest that is due on debt.

"With Graeter's corporate rescinding their offer, we really don't have that many options at this point other than to shut down in an orderly fashion," Barakat said, adding he thought bankruptcy wasn't an option because of the difficulty of the process.

Graeter said the company rescinded the offer because there was confusion among the franchisee's creditors about whose debts were secured. Barakat disputed that, saying "everyone had agreed to their offer."

The idea had precedent: This year, the company bought 15 stores in Ohio — 11 in Columbus and four in Dayton — from a retiring franchisee.

"I now know that it's a huge effort to buy another business," Graeter said. "You can't do it that quickly, and frankly we found a few unpleasant surprises when we bought the other franchisee."

He said comments by former business advisers sealed the decision. They said, "'Would you have built that store?' and I said, 'No.' He said, 'Then why the heck would you buy it?' And I didn't have a good answer."

Those with gift cards may use them this week in Lexington or Northern Kentucky or use them any time at other locations, such as those in Louisville or Ohio. They can't be redeemed online, but customers may call Graeter's corporate office and use them to pay for orders from the company's headquarters.

Graeter offered an optimistic outlook: "Hang in there, Lexington. We'll be back."

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